Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 55

Engine oil purifier machines can effectively remove acid, pitch, particles, water, and gas from used oil. Purifier A was purchased 5 years ago for $90,000. Its operating cost is higher than expected, so if it is not replaced now, it will likely be used for only 3 more years. Its operating cost this year will be $140,000, increasing by $2000 per year through the end of its useful life, at which time it will be donated for its recyclable scrap value. A more efficient challenger, purifier B, will cost $150,000 with a $50,000 salvage value after its 8-year ESL. Its operating cost is expected to be $82,000 for year 1, increasing by $500 per year thereafter. What is the market value for A that will make the two purifiers equally attractive at an interest rate of 12% per year